Understanding the Financial Risks of Surrogacy in the US for Australian Parents
When Australians think of going to the US for surrogacy, they often think that the risk is the legal risk. In particular, if they come from the ACT, New South Wales or Queensland (although they can also apply in the NT, SA and WA), they’re worried about whether they might be committing a criminal offence in undertaking surrogacy in the US. That’s really the third risk for them. Number one and two that stand out to me (and I’ve had clients go to the US for surrogacy since 2008) are first the exchange rate which, as we know, bounces around and second, healthcare costs. The cost of insurance in the US is variable and its complexity is mindboggling.
The exchange rate has bounced around a lot – now I’m not an authorised person under a financial services licence but I can comment about what I see with the exchange rate. It moves around a lot. The most telling comment I think was a couple of years ago when clients told me how much they were spending on their surrogacy journey. It hadn’t finished and they had spent a lot – and then they explained what had happened. They had signed the contract when the Australian dollar was worth 81 cents US. But they had to pay when the Australian dollar was worth only 66 cents. Suddenly they had this huge blowout in their costs, so it’s important if you’re an Australian doing surrogacy in the US that you are focused on the exchange rate and how to minimise your risks.
The other big risk is that of healthcare costs. Insurance coverage in the United States is a lottery. It is extraordinary looking in as an outsider that there is no national approach in the US to ART insurance, but that insurance varies State by State and can vary by County – or even by hospital if liens are imposed. Some hospital chains such as Kaiser Permanente impose a lien on how much the surrogate is going to get paid. A lien is a type of security. In other words, the surrogate doesn’t get paid until the hospital gets paid. Their worry is that intended parents, particularly those from overseas, don’t pay them and then the hospital is left holding the bag.
It’s necessary for me to tell my clients to nail down US insurance as best they can because if they don’t nail it down and something goes wrong, in their bid to become parents, they could lose everything they own. To have a child without a home to live in is a grim prospect worthy of Charles Dickens.
The number two fear for Australian intended parents undertaking surrogacy in the US is the risk of something going wrong with the newborn or surrogate and not having the right insurance to cover it. The level of risk is obvious when those helping my clients to become parents – the US attorney, the US egg donor agency and the US surrogacy agency – and sometimes the IVF clinic all have these nice little disclaimer clauses in their retainer agreements. Those clauses boil down to, in essence, all care no responsibility. Sometimes they are longer in form than that, but that’s the essence of them: “We’ll help you with this, but there are no guarantees that you’ll actually ever get any insurance.” Sometimes they say – well we’re not experts on insurance.
The best that I can do to minimise risk for my clients is that after they get advice from the surrogacy agency and their US attorney to then always, always get a second opinion from a specialist broker in this field. While that doesn’t eliminate the risk, it reduces it.
I remember well a fortnight – for Americans that’s two weeks – back in 2014. A couple had come to see me in 2012 to undertake surrogacy in the United States. The difficulty that I had with this couple was that they were from New South Wales. The advice I gave them about the process was that they had to nail down insurance and I could give them advice about what was involved, but I couldn’t take the matter any further because, in my view, what they were proposing to do was illegal under New South Wales law so therefore I couldn’t give them ongoing advice. But I told them that they had to nail down insurance and if they didn’t nail it down, then if something went wrong, it could be horrendously expensive.
Two years later they came back to me and said, “We’ve got a problem. Our child has been born and we’ve just been hit with a A$1million bill from the hospital.” Sometimes children don’t have an easy delivery. Sometimes there are complications and if they have complications, then the cost of a neonatal incubator is extraordinary. Typically, at the moment I understand it’s US$15,000 a day.
Well, I couldn’t help them much further but tell them to go back to the hospital, go back to their US attorney and see what they could do to mitigate their loss.
Two weeks later, or as I said earlier, a fortnight, I was speaking to a couple who’d had twins in the US – they’d decided to have twins and then they discovered shock and horror that they couldn’t get insurance – or at least insurance at a reasonable price. Now that was back in 2014. What we’ve seen since then is there are many, many fewer Australian intended parents undertaking surrogacy with twins in the US because the cost of insurance is just completely off the dial. Insurance companies realise that it’s a much higher risk, both to the children and to the surrogate, and factor that cost into the provision of the insurance.
The result for this couple was that they didn’t get the insurance they needed.
The US isn’t like Australia – it has no Medicare style system. Insurance is needed for the egg donor, for the surrogate (both life insurance and health insurance) and the newborn. If you have ever travelled to the US and obtained travel insurance, the US is the only place in the world where all the risks come together if you go there without travel insurance.
The US has the Affordable Care Act – what’s sometimes called Obamacare – but one thing about the Affordable Care Act is it’s not Australia where we know some of the cost is met by the taxpayer and some is met by the individual. Everything is met by the individual and the thing about Australia with Medicare and health insurance is that it covers the nation. That’s not the case in the US. It’s covered on a market by market basis, so sometimes it’ll vary by State. Sometimes it’ll vary within States, sometimes it’ll cover several States.
If the surrogate does not have ACA insurance, she can only obtain it by enrolling. In most States, that is only available between November and early January. For those who don’t want to wait, or are afraid that they will lose this surrogate, ACA isn’t available.
Whatever health insurance the surrogate has needs to be checked, assuming she is prepared to use her insurance for the surrogacy journey. If she does, then typically she charges a higher fee. That’s fair enough, because if there is a claim on that insurance might affect her ability to claim later on.
It’s amazingly complex about whether her insurance will cover surrogacy. Recently, I’ve seen one case where it was said that the surrogate’s insurance was going to cover surrogacy and then there was some mucking about and it was said that her insurance didn’t cover surrogacy. That’s not a good place to be in after the child is born. So that really needs to be ironed out at the beginning and I certainly can’t say that I’m an expert on that. That’s why I always defer to those who are in the market over there – I’m not a lawyer over there and I’m not in insurance over there – and so, experts over there really need to look at it.
But in any case, back to this couple.
They couldn’t get the right insurance and then things didn’t work out exactly according to plan. At about that stage I would have said that for most Australians, undertaking surrogacy in the US the cost was about A$150,000. Some expensive agencies were more, but for most the cost was then about, as I said, A$150,000. I just asked them: “How much has this all cost?” The husband said, rather vaguely on the phone: “Oh, ah about $500,000.” The wife snapped back immediately: “It was $1million.” Now that was A$1million- but she knew instantly how much it had cost – no doubt about it at all that she knew what the cost was – and the cost was high because the insurance wasn’t there.
That couple could afford that cost. Most can’t.
I don’t like receiving phone calls from clients who haven’t got the right insurance in the US and then something goes wrong. I want them to make sure that they have peace of mind so that when the child is born, if something goes wrong, they’re covered and they can come home.
The most expensive I’ve ever heard about was a couple living in the US. They had twins who were born very early in one State and ultimately the twins had to be medevaced from that State to the State that they lived in in the US. Their estimate is that the insurance company spent about US$5million. That didn’t include the medevac costs – they had to pay for that themselves, so they had friends help out with that. That figure just shows the risk for insurance companies and therefore the risks if you don’t have the right insurance.
